A Payment Gateway vs. Payment Processor

Who knew that gateway and processor were not synonymous in the world of payments? Instead, the payment gateway and the payment processor are completely different things. Let's peek behind the curtain of this complex financial process to understand the differences.

When making a credit or debit card transaction, four parties combine to make that unified experience occur, with the payment gateway and payment processor acting as mediators between all of them.

  1. Business accepting payment
  2. Consumer
  3. Business’s bank (the acquiring bank)
  4. Consumer's bank (the issuing bank)

What is a Payment Gateway?

For a business to accept payments, they will need a payment gateway. A payment gateway is a software application (primarily web-based) that accepts consumer card or ACH payment data, encrypts it, then routes it to the appropriate network for transaction processing. Payment gateways are essential for e-Commerce and valuable for in-person exchanges. Completely secure, they can be web-based or a stand-alone device allowing businesses the flexibility to accept payments in-store or online for quick and easy payment processing.

The top payment gateways simplify processing card and ACH payments and transaction management. Once payment is made, the gateway triggers the payment processor to begin communicating to each party's acquiring and issuing banks.

Different payment gateway companies might offer more attractive features to specific industries, but all require a processor to interconnect between banks.

REPAY's gateway runs the gamut of online payment tools to improve the payment experience for end-users. These include an online portal, SMS/Text payments, Interactive Voice Response systems (IVR), email payment links, the ability to set up recurring payments, automatic updates to stored card data that has expired, comprehensive reporting, and more.

Defining a Payment Processor

Hardly anyone is using cash to make purchases. Cards, ACH, and digital payment methods are making up more transactions than ever before. The payment processor is a software provider that performs the payment transaction, no matter the payment method used. Once the consumer initiates the payment, the business moves the funds for processing by the issuing bank and the acquiring bank.

A payment processor typically provides the omni-channel technology to accept payments, such as an online portal or a card-swipe machine. Think of the processor as the "behind-the-scenes" crew that does the backend labor for the gateway. Payment processing may seem multifaceted, but it simplifies the payment experience, letting merchants focus more on what they do best – selling their goods and services.

Can a Provider Offer Both?

Yes! Working with a company that is both a payment processor and offers a robust gateway reduces processing time and communication errors. It streamlines operational efficiency, making tasks like returns more straightforward. Processors such as REPAY offer both. They also partner with multiple banks in our industries to cater to the needs of every business, no matter the industry.

The Key Difference

A payment processor facilitates the transaction, and a payment gateway is a tool that communicates the approval or decline of the transactions between the merchant and the customers.

What is Critical?

The essential aspect of payment gateways and processors is security. Therefore, the gateway and processor must be Payment Card Industry Data Security Standard (PCI DSS) compliant to ensure secure transmission and protection of consumers' financial information.

PCI DSS requires all gateways and processors to be audited and certified annually to a current standard, so be sure to investigate a company's compliance certification when determining a third-party provider. Many payment processing providers will assist with account setup and ongoing compliance.

There are endless options, so be choosy. But how do you know where to start? These are the top areas to research when selecting a third-party gateway or processor:

  • Compliance
  • Security
  • Solutions & Technology
  • Industry-specific service
  • Price-points


REPAY is an all-in-one payments provider to ensure clients have a flawless payment experience. Learn more about how we can work together to provide an excellent experience! Reach out today for a free demo.

Need to see more? Join us for a demo!

By Maureen Cole, REPAY, www.repay.com

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